CPCU 500 Practice Exam questions with answers
Risk is... -Correct Answer-Uncertainty of Outcomes
Recalibrating predictive models to give more weight to recent events is the insurance industry's response to which one of the following evolving risks? -Correct Answer-Climate Change
Lori and Denise ...
CPCU 500 Practice Exam questions with
answers
Risk is... -Correct Answer-Uncertainty of Outcomes
Recalibrating predictive models to give more weight to recent events is the insurance industry's response
to which one of the following evolving risks? -Correct Answer-Climate Change
Lori and Denise work in the same region at Taunton Insurance. They were working on individual projects
with different objectives but realized that they could help each other out by sharing information and
resources. Which one of the following is the act of working together to achieve individual objectives
rather than a shared objective? -Correct Answer-Cooperation
The use of risk quadrants to identify and categorize risk provides a framework for... -Correct Answer-
Holistic Risk Identification
Hardware Store has been able to control its prices and inventory since it has no competitors. A new
highway currently being constructed is going to allow increased competition for Hardware Store.
According to the quadrants of risk, this risk of increased competition falls into the category of... -Correct
Answer-Strategic Risk
Regarding diversifiable and nondiversifiable risk, which one of the following statements is accurate? -
Correct Answer-Systemic risks are generally non-diversifiable
1. Company X hired a safety consultant to complete a walkthrough of their operations and advise them
of any unsafe conditions or out-of-compliance procedures.
2. Company Y considered purchasing a new type of battery for their phones, but the board rejected the
idea due to the increased risk of product liability claims.
3. Company Z conducted a quantitative risk assessment examining the likelihood and consequences of
the major risks to their company. -Correct Answer-Company X - Identify risks
Company Z - Analyze Risks
Company Y - Treat Risks
George has received an inheritance and is deciding what to do with the money. He has limited his
options to four choices: donate all the money to his favorite charity, use the entire inheritance to buy a
yacht, invest the inheritance in a small rental property, or use the entire amount to purchase T-bills.
Which one of the following statements is true regarding the risk involved in George's options? -Correct
Answer-The rental property presents both pure and speculative risk; property value may increase, and
the building could burn down.
An integral part of the risk management process is defining risk criteria. These criteria should be aligned
with an organization's (select all that apply): -Correct Answer-Risk management policy and objectives
Sixth National Bank stores all of its financial records in an electronic data base. Sixth National customers
are able to access their accounts on-line with a user identification number and a password. Last
, weekend, a computer hacker was able to breach the firewall of the electronic database and gain access
to customer account data. This operational risk for Sixth National Bank is -Correct Answer-a systems risk
Four Grains Cereal Company signed a contract to deliver 250,000 boxes of cereal to a national
supermarket chain at a specified price per box of cereal six months from today. Between now and when
the grain to make the cereal is purchased, the cost of the grain may increase. If the cost of this important
ingredient increases, the profitability of the transaction will be altered. This financial risk that Four
Grains faces is -Correct Answer-Price risk
A 35-year-old female was employed at a company for five years. During her term of employment the
company began having financial difficulty and determined that they needed to lay off 5 of its 125
employees in order to stay in business. The company laid off the female employee and 4 other female
coworkers. All of the women had a history of receiving positive employee evaluations. The laid off
workers filed a claim against the company alleging discrimination. Which one of the following best
describes the basis of the employment practices claim filed against the company? -Correct Answer-
Wrongful termination
Quade Enterprises has been targeted by animal rights groups due to its use of animals in product testing.
One night, bricks are thrown through the front windows of Quade's corporate headquarters. This act is
an example of -Correct Answer-Vandalism
Liability for completed operations is so similar to which one of the following types of liability exposures
that the two are often treated as components of one loss exposure? -Correct Answer-Products liability
What is the name given to a claim by an employee who says that he or she was fired because of the filing
of a workers compensation claim? -Correct Answer-Retaliation claim
Danforth Grocery Store specializes in fresh produce and is open 24 hours year-round. The store has
contracts with suppliers to deliver produce and foods by 5:00 a.m. daily, so the parking area at the rear
of the store is congested from 4:30 a.m. to 5:30 a.m. Customer traffic is heaviest from 7:00 a.m. to 9:00
a.m. and again from 3:00 p.m. to 6:00 p.m. The store has had six slip-and-fall claims from customers in
the past year. Danforth Grocery Store is most exposed to which one of the following types of liability
loss? -Correct Answer-Premises liability
Lawn Chemical Company applies fertilizer and weed killer to lawns and shrubs. Which one of the
following is a liability loss exposure to which Lawn Chemical Company likely has a significant exposure? -
Correct Answer-Completed operations liability
Which one of the following Internet of Things devices has greatly influenced vehicle and driver safety? -
Correct Answer-Telematics
Why will relatively new insurer South Insurance (SI) include equipment breakdown coverage in its
commercial package policies? -Correct Answer-To facilitate reinsuring the coverage with an insurer
specializing in that line of insurance that can also provide claims services
Austin is considering purchasing a watercraft for his family. A friend who also owns a watercraft advised
Austin that insurance coverage for the watercraft may be provided under his homeowners or personal
auto policy. Which one of the following will best determine if the watercraft can be covered under one of
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